London, 11 May 2010

London, 11 May 2010

Listening to investors

Luxembourg – The future opportunities & challenges for alternative investment funds

Moderator: Michael Ferguson, Partner, Ernst & YoungGeorges Bock, Partner, KPMG

Noel Fessey, Managing Director, Schroder Investment Management Benjamin Lam, Partner, Deloitte

Jérôme Wigny, Partner, Elvinger Hoss & Prussen

Luxembourg –The European Hub For Alternative Investment Funds

“Setting the scene”

Overview of the market Service providers Regulatory developments Re-domiciliation Taxation developments Why Luxembourg for Alternative Investment Funds? Q & A

Real Estate Hedge Funds Newcits Private Equity

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Overview of the market The SIF Success Story

Strong growth under the SIF Law since February 2007

SIF Law 13 Feb 2007

Source: CSSFAnnual Monthly

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SIF Umbrella structure

Sub-fund 1

Single hedge fund

or FoHF

Sub-fund 2

Real estate fund

orFoREIF

Sub-fund 3

Venture capital

orprivate equity

orFoPE/VCF

Sub-fund 4

Long onlystrategy

(plain vanilla UCITS-like

fund)or FoF

Sub-fund 5

Dedicated to

1 HNWIor family office

or to 1 institutional

investorPension fundInsurance companyRe-insurance companyEtc.

Sub-fund 6

Thematic funds

(socially responsibleinvestments,microfinance,

clean tech, natural

ressources, transport, energy …)

Sub-fund 7

Exoticassets(luxury

goods, art, fine wine,

….)

Overview of the market The fund product – The SIF – flexible and versatile

Master-feeder structures Pooling Listing

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The leading European regulated private equity centre Over 300 private equity funds Over US$ 40 billion of private equity fund assets administered in Luxembourg Growth of 850% over last 5 years Leading private equity service providers present in Luxembourg Leading global private equity managers operating in Luxembourg

Overview of the market Luxembourg – a growing European hub for private equity (1)

US$ 40 billion in assets Over 300 funds

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3i American Capital Apax Partners Bain Capital BC Partners Carlyle Group Cinven CVC Fortress Goldman Sachs Investcorp

JP Morgan KKR Kredietanstanlt für Wiederaufbau

(KfW) Lazard LGT Capital Partners Oaktree Capital Permira Unicapital Warburg Pincus

Global private equity houses using Luxembourg as a center of excellence

Overview of the market Luxembourg – a growing European hub for private equity (2)

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The leading European regulated real estate center Over 130 real estate investment funds Over US$ 30 billion of real estate investment fund assets administered in

Luxembourg Growth of 500% over last 5 years Leading real estate service providers present in Luxembourg Leading global real estate managers operating in Luxembourg

Overview of the market Luxembourg – a leading European hub for real estate (1)

US$ 30 billion in assets Over 130 funds

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Aberdeen AMB Capital Aviva BlackRock BNP Paribas CBRE Investors Deutsche Bank Fidelity Franklin Templeton Heitman

Henderson Global InvestorsHinesINGJPMorganLaSalleMorgan StanleyPramericaPrologisSchrodersTishman SpeyerUBS

Global real estate managers using

Luxembourg as a center of excellence

Overview of the market Luxembourg – a leading European hub for real estate (2)

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The leading European regulated hedge funds center Over 2,000 hedge funds and funds of hedge funds Over US$ 190 billion of hedge fund assets administered in Luxembourg Growth of 182% between June 2005 and June 2008 Leading hedge fund service providers present in Luxembourg Leading global hedge fund managers operating in Luxembourg

Overview of the market Luxembourg – a leading European hub for “regulated” hedge funds (1)

US$ 190 billion in assets Over 2,000 funds

Aberdeen Asset ManagersAlliance BernsteinBlackRockBlueBay Asset ManagementCrédit AgricoleCrédit SuisseDeutsche BankFidelityGLGGoldman SachsHSBC

ING InvescoJP Morgan LCF RothschildLyxorMANMorgan StanleyPermalPioneer InvestmentsTranstrendUBS

Global hedge fund managers using

Luxembourg as a center of excellence

Overview of the market Luxembourg – a leading European hub for “regulated” hedge funds (2)

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260

370

450

560

670

0

100

200

300

400

500

600

700

2005 2006 2007 2008 2009

Number of Newcits

+ 260 %

Overview of the market Overview of Pan-European Newcits Market (1)

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Growth of 260% over last 4 years

Estimated AuM in Newcits of US$ 47 bn

Projected growth in AuM of Newcits over next 5 years US$ 170 bn

Current Luxembourg market share + 42%

Overview of the market Overview of Pan-European Newcits Market (2)

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Source: Luxembourg Financial Group

Multi-strategy14%

Long/Short and Equity Market

Neutral36%

Emerging Market (inc Asia)5%

Credit Fund17%

Volatility Arbitrage

5%

Convertible Arbitrage1%

Event Driven1%

Global Macro5%

Currency7%

Managed Futures / CTA

5%

Commodities4%

HF UCITS by strategy, April 2010

Overview of the market Overview of Pan-European Newcits Market (3)

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Service providers

Third party administrators?

Custodian/PB?

Other ?

Leading service providers present

Specialization Breath and depth of services

offered Multi-cross-border

distribution/placement support

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Regulator and regulatory developments

The Regulator

1. What is new?2. Future Developments?

Alternative Investment Fund Managers (AIFM) Directive: How is Luxembourg positioned?ScopePassportsDepositaryValuatorDelegationOrganizational requirementsSpecific provisionsThird country

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Re-domiciliation (1)Drivers for re-domiciliation

G20 discussions

Prohibition on investors investing in the so-called “offshore tax haven funds”

Increasing pressure by home country regulators

Accounting standards e.g., Fin 48

AIFM Directive

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Re-domicilation (2)Re-domiciliation of funds (incl. UCITS) from end 2007 to end 2009

Luxembourg, 31%

Hong Kong, 17%

Cayman Islands, 11%

Guernsey, 8%

Ireland, 6%

Jersey, 6%

UK, 6%

BVI, 3%

Channel Islands, 3%

France, 3%

Malaysia, 3%Mauritius, 3%

Delaware, 3%

Countries of origin Target countries

Cayman Islands, 50%

BVI, 8%

Guernsey, 8%

Bermuda, 6%

Ireland, 6%

Luxembourg, 6%

Bahamas, 3%Germany, 3%

Jersey, 3%

Mauritius, 3%Netherlands, 3% UK, 3%

Over 30% of re-domiciliations of funds between 2007-2009 were to Luxembourg

Source : Lipper18

Taxation developments (1)

Extension of withholding tax exemptions to all DTT countries

Extension of DTT network

Compliant with OECD cooperation requirements

Nominal increase of minimum income tax

Increase of corporate income tax from 21,84% to 22,05%

BUT: Participation exemption untouched

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Double Tax Treaties / Exchange of Information Clause Currently 57 double tax treaties in force Treaties entered into force (1.1.2010)

– Azerbaijan, Georgia, India, Moldova, United Arab Emirates 20 tax treaties pending

– approved: Qatar (will enter into force on 1.1.2011)– approved: Argentina (air traffic), Armenia, Bahrain, Liechtenstein, Monaco, Ukraine– signed (in 2009): Albania, Barbados, Kazakhstan, Kuwait – initialed: Cyprus, Kirghizstan, Macedonia– negotiations: Lebanon, Pakistan, Panama, Serbia & Montenegro, Syria, UK

(renegotiation) Additional protocols to existing treaties (exchange of info):

– Austria, Belgium, Denmark, Finland, France, Germany, Iceland, Japan, Mexico, Netherlands, Norway, Spain, Switzerland, Turkey, UK, US, (+ treaties with EOI: Armenia, Bahrain, Barbados, India [most-favored nation treatment], Liechtenstein, Monaco, Qatar, San Marino)

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Taxation developments (2)

Key international developments

EU savings directive – flow through for non EU corporations

FATCA regulation

AIFM-directive reference to OECD Art-26 (5)

Luxembourg unique possibility for all-in solution in one legislation

Combination of regulatory framework and structuring flexibilities

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Taxation developments (3)

SIF SICAR

Income tax Tax exempt Tax exemption for income derived from transferable securities. Tax exemption for one year for income on cash held for the purpose of a future investment. The remaining income is subject to the ordinary income tax of 28,59 % (Municipal Business Tax + Corporate Income Tax ‐Luxembourg city 2010).

Withholding tax on dividends & capital gains 

Not subject to withholding tax except if EU savings directive applies.

Not subject to withholding tax except if EU savings

directive applies.

Subscription tax • Annually 0.01% of NAV.

• Tax exemption possible for certain money market and pension funds or SIFs investing in other funds already subject to subscription tax.

No subscription tax.

Net wealth tax Tax exempt Tax exempt

Capital duty No proportional capital duty No proportional capital duty

Value Added tax (VAT) Tax exemption on management services. Tax exemption on management services.

Double Taxation Treaties (DTT)

FCP

No access to DTT signed by Luxembourg; exception Ireland.

SICAV/SICAF

Limited to some DTTs.

Applicability of DTTs is determined by a decision taken by the Luxembourg fiscal authorities, but without practical experience on the exact classification that may be adopted by the other 

t i

SICAR in the form of a corporate entity (all types except

the SCS) should benefit from the Luxembourg double

tax treaty network.

Why Luxembourg for Alternative Investment Funds? (1)

Long established financial center of first class reputation

A world renowned “Quality Brand”

Legal structures catering for all segments of the alternative investment funds

industry

Fastest growing alternative investment fund sector in the world

Deep levels of expertise in all aspects of fund creation, administration and

distribution

A highly qualified multi-lingual workforce

Highly respected regulator, and efficient supervision

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Enhanced trend of conversion from offshore centers from Luxembourg

Access to worldwide distribution

Attractive tax regime

Presence of global asset managers

Expertise and know-how

Commitment to excellence and reliability

Stable jurisdiction, predictable planning and long-term investment decisions

Why Luxembourg for Alternative Investment Funds? (2)

High conversion into Luxembourg

Access to worldwide distribution

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Q & A

We are pleased to take your questions…

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